Some Hospitals Charge 1000% Markup

New research by professors at Johns Hopkins Bloomberg School of Public Health and Washington & Lee University found that some for-profit hospitals markup charges for medical services to rates 10 times higher than what's allowed by Medicare.

To conduct their study, the team examined the 2012 Medicare cost reports from the Centers for Medicare and Medicaid Services and came up with a charge-to-cost ratio. That indicates how much hospitals mark-up charges beyond what Medicare covers. The results showed that not only did 50 hospitals charge, on average, 10 times the costs allowed by Medicare, but also that the typical U.S. hospital charged at rates around 3.4 times the Medicare-allowed costs in 2012. One of the worst offenders was Community Health Systems, Inc., which operates 25 of the 50 hospitals with the highest markup rates in the study. Hospital Corporation of America, runs 25 percent of the hospitals on the top of the list. Also, 20 of the 50 hospitals are located in Florida.

These markups generally don't cause big problems for people with health insurance because they typically pay only the negotiated rate set between the insurer and health care provider. But those without insurance most likely will have to pay the full rate, which often leads to bankruptcy and bad credit scores.

The study’s authors noted that no other industry in the U.S. can operate with 1,000 percent markup and stay in business. Their proposed solution would be to have state or federal officials legislate a maximum allowable markup, or to enforce price transparency on hospitals.